[Premium] Deep Dive Into India's Pharma Sector

First let's start with Sun Pharma, which has sparked this conversation by falling roughly 33% over the last three weeks. At this point some consolidation should be expected near 435 before ultimately resolving lower, targeting 281.25.

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Aurobindo Pharma has been consolidating for almost four years and is now toward the top of that range. If prices can eventually clear 896, we can be long with an upside objective of 1,140.

We continue to wait for Biocon's consolidation below 676 to resolve to the upside. It continues to hold up well, so our expectation is that this range eventually does resolve higher and targets 1,050.

Divi's Laboratories is a name we've liked since it broke out of a 4-year base in October. We want to be buying any weakness in this name as long as it's above 1,381.50, with an upside target of 1,905.

Dr. Reddy's Labs has consolidated extremely well and looks to be setting up for another move higher. We want to be buying a breakout above 2,780, with a target of 3,300.

Jubilant Life Sciences is another name that's been consolidating well. If prices can get above 873 on the weekly chart, we can be long with a target of 1,360.

Pfizer Ltd. has been weak after confirming a failed breakout above 3,265, but looks to be regaining its footing. If prices are above 2,637, we can be long with a target of 3,265. The longer this takes to resolve higher, the lower probability that this trade ultimately works. Bulls want to see prices get going as soon as possible.

Sanofi India Ltd. continues to consolidate between two of our previous price objectives, 5,570 and 6,585. If prices can ultimately resolve this range to the upside, then we want to be long with an upside target of 8,220.

Torrent Pharma is making its third attempt to break out above 1,695 after pulling back with momentum remaining in a bullish range. If prices are above that level, we want to be long with a target of 2,030.

On the short side the setups are a bit messier. Two names that look decent are Piramal Enterprise and Wockhardt Ltd.

If Piramal Enterprise breaks back below 2,080, we can be short with a downside target near 1,360.

As long as prices of Wockhardt Pharma are below 567, we can be short with a downside target near 350.

The Bottom Line: There are a few nasty charts in the Pharmaceutical Sector, but there are also a lot of constructive ones. The names discussed above continue to show relative strength and are offering skewed reward/risk long opportunities where our risk is well-defined.

This continues to be a two-way market, so we want to continue to play both sides of the tape by focusing on the strongest and weakest names we can find. Until there becomes a clear trend in the broader averages, we'll trade the market we have, not the one we'd necessarily want.

As for the Pharma Sector, there are more long setups than short ones despite the poor action of the sector index itself on an absolute basis and relative to the broader market. If we're wrong and the rest of these stocks "catch-down" to Sun Pharma, then we know where we're wrong and will exit with minimal losses.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team